Everything is possible with Local Authorities and government agencies. (I once had a notice about a drainage ditch which notice depended on water running uphill ). There are lots of rules about keeping sheep; do you have a County Parish Number and are the sheep double tagged, are just two gems out of dozens; but it surely could only be some environmental regulation about maintaining grazing in some area, such as a place of special scientific interest or within the boundaries of a national park, which would require you to keep sheep (I'm not saying there is such a regulation, but it wouldn't be a total surprise). Or it is possible to have such a condition of use in a lease or in old deeds, under a clause relating to husbandry.
But haven't the LA told you what regulations you are supposedly not complying with?